What does a Cyprus deal look like?

Felix Salmon considers some possible scenarios, some of which involve the EU giving ground.  (Sadly the “sell northern Cyprus” option won’t be seriously debated.)  Daniel Davies offers numerous complex scenarios, some of which end badly.  Zero Hedge offers options.

How much is Cyprus per capita gdp lower if the country has no future as a financial center?  That is likely the case anyway.

If this is one of those waiting/bargaining games, for whom does the situation worsen most as time passes?  For how long can the Cypriot banks stay closed?  Can they ever really reopen again without a major bailout?  Germany seems to hold most of the cards.  Maybe Cyprus wins the stare-down game only if the costs of Cypriot collapse — to the Germans — appear higher as time passes.  That’s a difficult scenario to foresee, since it seems that only by having a Cypriot collapse do we get a much better sense of what those costs would be.

The broader problem of course is that Italy, Spain, and Portugal all have their eyes on any possible renegotiations.  It is very costly for the EU to give serious ground because then further and much larger demands come out of the woodwork.  Italian voters and political parties are encouraged too and I don’t have to tell you in which direction.


Comments for this post are closed